Sustained GDP growth, supportive government policies and regulations, and increased interest from private equity and venture capital (VC) investors have contributed to robust mergers and acquisitions (M&A) activity in Indonesia in recent years. The year 2021 was a landmark one for such deals in Indonesia, with a record total value of $26bn from 147 deals. Amid global high interest rates and economic volatility, the value of M&A deals in Indonesia dropped to $22.9bn across 215 deals in 2022 and $14.36bn from 154 deals in 2023. The total number of Indonesia’s M&A deals remains comparable to pre-Covid-19 pandemic levels, although the overall value of deals has been on an upward trend.
Rapid Expansion
With roughly 40% of South-east Asia’s population, Indonesia had approximately 185m internet users as of January 2024 for an internet penetration rate of 66.5%. That same month the country had more than 353m active cellular mobile connections for a penetration rate of 126.8%. Consequently, Indonesia’s digital economy has seen significant growth in recent years, spurred by a young, tech-savvy population and increasing internet usage. According to a January 2023 policy brief published by the Jakarta-based Economic Research Institute for ASEAN and East Asia, Indonesia’s digital economy grew by 414% from 2017 to 2021. The 2023 e-Conomy SEA report, a collaboration between Google, Singapore-based investment company Temasek and global consultancy Bain & Company, projects Indonesia’s digital economy to grow by 73% between 2021 and 2025, eventually reaching a value of as much as $360bn by 2030, compared to $82bn in 2023.
Indonesia plays a leading role in the technology sector in the region. As of 2022 the country boasted 15 unicorns – start-ups valued at more than $1bn – in areas such as travel reservations, e-commerce and digital payments. Two of these were decacorns, or companies that are valued at more than $10bn. Ecosystem development organisation Startup Genome’s 2023 report ranked Jakarta 15th overall in its top-100 emerging start-up ecosystems, while StartupBlink had the capital in its top 25 cities in the world for start-ups in the e-commerce and retail, financial technology (fintech) and food technology industries.
Technology Transactions
In recent years Indonesia has experienced a surge in M&A transactions within its digital economy, as technology start-ups have successfully scaled out their operations to tap the domestic market. A notable example is the May 2021 merger between ride-hailing platform Gojek and e-commerce marketplace Tokopedia to create GoTo Group, which is now the country’s largest technology company. Consolidations within the digital ecosystem reflects companies’ efforts to broaden their market presence and offer integrated services to consumers, capitalising on synergies between ride-hailing, e-commerce and fintech services. This is expected to enhance competitiveness and drive growth in the digital economy. Another notable recent transaction in the space was TikTok’s acquisition of a 75% stake in Tokopedia for $840m. The deal, which concluded in the first quarter of 2024, aims to integrate TikTok Shop, the social media platform’s e-commerce service, into Tokopedia after Indonesia banned online shopping on social media platforms in September 2023.
Several factors are driving interest in M&A within Indonesia’s digital economy. First, intense competition among digital players tends to necessitate strategic partnerships or acquisitions to strengthen entities’ market position and achieve economies of scale. Second, rapid technological advancement and changing consumer preferences require companies in the space to continuously innovate and diversify their offerings to keep pace with competitors. Funding for M&A in Indonesia’s digital economy typically comes from various sources, including VC firms, private equity, corporate investors and strategic partnerships. The number of VC deals in the country has been steadily increasing as well, reflecting growing interest in early-stage start-ups.
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